US Government Reactions to the COVID-19 Mortgage Crisis

December 13, 2020
Antonio Flores

In the wake of the COVID-19 pandemic this year, land use has changed dramatically in places around the globe. Offices are no longer being used, as corporations switch to work-from-home policies. Apartments, which formerly commanded high prices due to proximity to work and entertainment, now find themselves without a justification for their prices, especially as their amenities are also closed for months. But another crisis is on the demand side: as millions of people were left without work for months, they found themselves unable to pay the rent or mortgage. Because of this, governments have had to make major policy adjustments to deal with the crisis, to prevent huge numbers of evictions this year. In the US, local governments along with the federal government have had varying responses to the mortgage-related fallout of the pandemic, lockdown, and associated economic problems, ranging from very little public assistance to bailouts to mortgage companies to total rent freezes. 

One of the biggest mortgage-related decisions of this year was made by the Federal Reserve, which ordered its lenders Freddie Mac and Fannie Mae to grant up to 12 months of loan forbearance for all lenders. This should help to ease the burden of property buyers across America, as they do not need to pay the mortgage until the worst of the pandemic and economic crisis is hopefully over. Following this, various major mortgage companies, such as Rocket Mortgage, have also released mortgage forbearance programs. 

The most extreme moves have been eviction and rent freezes upon landlords, who often rely on renters to pay their own mortgages. In many places like Washington State and the city of Washington DC, local authorities have declared unilateral freezes upon rent payments and evictions. Moreover, many major figures in the Democratic Party, such as Bernie Sanders and Joe Biden, have called for nationwide rent and eviction freezes in the wake of the COVID-19 pandemic. Of course, these freezes decimate the commercial renting industry: if the renters don’t pay, the renter doesn’t make any money, and if the landlord can’t evict them, they are effectively stuck with groups of squatters on their property. 

To conclude, local governments have played a major role over the past ten months in facing the consequences of the lockdown. There have been a range of measures taken by state and federal officials, ranging from forbearance policies to more extreme measures of freezes on paying rent and evicting.  

 

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